A year and a half after Dov Charney's dramatic ouster from the clothing company he founded, the former American Apparel CEO may have finally found a way back in.
The company, which filed for bankruptcy last year, has received a buyout offer valued at $300 million from investors Hagan Capital Group and Silver Creek Capital Partners, according to a statement today. A major part of their plan is to reinstall Charney, the firing of whom was "a shortsighted mistake," they said.
"Dov's creativity, entrepreneurialism, and dedication are the cornerstone of American Apparel," said Chad Hagan, managing partner of Hagan Capital Group, in a statement. "Removing him from the company's board and leadership was a shortsighted mistake and we are seeing the results of this error unfold in the declining performance of the company today."
American Apparel said in a statement that it "evaluates all bids consistently, and in the ordinary course." It added that it "remains focused on pursuing the completion of its financial restructuring following its planned bankruptcy court hearing at the end of this month."
The company also put out a press release today saying its debtors have all approved its own reorganization plan as part of its exit from bankruptcy.
Charney has been working to return to American Apparel from the moment he was served with a surprise termination letter in June 2014 alleging he misused corporate assets, violated sexual harassment policies and more. His exit set off chaos within the company, which reached screaming levels when hedge fund Standard General took control of it. Since then, Charney loyalists have fought with newly-installed managers, leaked sensitive internal financial documents and filed embarrassing lawsuits — last year, a piñata of the new CEO was literally beaten outside the Los Angeles headquarters.
Standard General, which initially worked with Charney, was adamant about barring the former exec from returning, especially as lawsuits between the two got ugly. American Apparel filed for bankruptcy in October, saying it would help the company manage its turnaround.
The proposal from Hagan Capital and Silver Creek has a higher enterprise value than the prepackaged bankruptcy plan that American Apparel is otherwise moving ahead with, according to the statement. The proposal includes $130 million from investors, $90 million of new equity and $40 million from a new term loan, the statement said. It added that the proposal is higher than an offer it made in December, will deliver higher returns to creditors and save jobs.
The investors said Charney has created a business plan to turn the company around and has "held discussions with many highly regarded industry executives" who are interested in joining American Apparel if the buyout goes through.
Indeed, American Apparel's finances have been a mess since Charney was ousted, but the company wasn't doing particularly well financially under him either.
When BuzzFeed News profiled him in February 2014, American Apparel’s stock was trading below $1 and the company hadn’t posted a profit since 2009. Beyond that, Charney’s behavior frequently made headlines, including accusations of lewd conduct from former employees and antics like calling his CFO a “loser” to the Wall Street Journal. The CFO swiftly resigned.
But of course, the finances have gotten a lot worse since he left. The takeover of American Apparel would be managed by PressPlay Group, the private-equity arm of PressPlay Global, which both investors back.
Charney has vowed to return to American Apparel both in meetings with garment workers and in media interviews since he was fired. But American Apparel CEO Paula Schneider told ABC News last year that Charney will never be reinstated.
“He is not allowed to be an employee, or an officer, or CEO of the company," she told them. "Period. There's no option there."
Sapna Maheshwari is a business reporter for BuzzFeed News and is based in New York. Maheshwari reports on retail and e-commerce.
Contact Sapna Maheshwari at firstname.lastname@example.org.
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